3/29/2009

Prior to the Iraq War, we here at RSP spent many lunch hours debating which organization was more corrupt, the United Nations or the International Olympic Committee. Both are anti-American, anti-capitalist organizations that excuse the behavior of third world dictators. However, the uncovering of the Oil for Food scandal (or, as we liked to call it, the Oil for Palaces scandal), cemented the UN as the more corrupt of the two organizations.

You would think the a scandal of the size of the Oil for Palaces program would force the UN to keeps its nose clean. Well, guess again, it didn’t. This past week, according to a confidential UN internal investigation (the UN’s investigation are almost always confidential. That way, we, the US taxpayers who pay most of the UN’s freight, won’t know that our hard earned money has been stolen by international bureaucrats), the UN official in charge of the UN’s Afghanistan reconstruction efforts diverted over $500,000 to himself for his personal use.

Gary K. Helseth, the head of the UN Office for Project Services in Afghanistan from 2002 through 2006, is accused of using the funds for lavish purchases. The investigation claims that Helseth improperly used hundreds of thousand of dollars that were given to the UN’s Afghanistan reconstruction program by the US Agency for International Development.

These purchases included first class flights to Las Vegas and meals in expensive restaurants in Copenhagen, Dubai, Florence and New York City. Additionally, the investigators’ report changes that Helseth diverted funds for rent and a home renovation. Mr. Helseth is also accused of stealing $65,000 in cash from a UN safe and billing the United States and other international donors more than $60,000 for entertainment, including grandiose parties at his Kabul residence where guests enjoyed beluga caviar, Norwegian salmon and foie gras.

But the opulence didn’t stop there. Helseth defends his purchased of a new Lexus with UN money. However, he does admit that the purchase of $66,000 in gym equipment was “a little over the top”.

What do the powers that be at the UN do after the issuance of this report? They disband the unit that conducted the investigation and they prevent the head of this unit, Robert M. Appleton, from being promoted to the head of the UN’s investigations division. Why was Mr. Appleton denied his promotion, you ask? Well, top UN officials said it was because Mr. Appleton is a Mr. (i.e., he isn’t a female) and he is an American. So much for the UN being a meritocracy. With this gem, UN officials have finally outed themselves as the practitioners of identity politics.

This is just another in a long line of scandals that involve high ranking UN officials. Here’s a list of a few others:

· Of course there is the previously mentioned Oil for Food program, in which then-UN Secretary General, Kofi Annan’s, son personally profited.

· Don’t forget when the United Nations disclosed that its Ukrainian peacekeeping contingent in Lebanon, including the commanding officer, had engaged in "significant financial misconduct".

· There is my personal favorite – the sexual abuse and exploitation of war refugees in the Democratic Republic of the Congo by UN peacekeepers and staff. The worst of the approximately 150 allegations of misconduct--some of them captured on videotape--included pedophilia, rape, and prostitution.

· Also, there was the 2005 scandal in the UN procurement department in which several Russian nationals pleaded guilty to bribery and corruption.

· Of course, what list of UN malfeasance would be complete without mentioning the outright larceny at U.N. offices in Geneva.

· How about more sex, the deportation of more than 100 Sri Lankan peacekeepers from Haiti for the selling of Haitian women into prostitution.

· Let’s not forget about the theft and resale of food rations by Ukrainian pilots serving the United Nations in Liberia.

With a record like this, it is unfortunate that so many Americans worship at the alter of the United Nations. With the UN in the midst of an attempted international power grab by trying to implement a world wide system of “Cap and Trade” and strongly advocating for an international currency in place of the dollar, it is helpful to remember that they are unable to keep their own house in order.

Americans should always remember that the UN is nothing more than a hapless, anti-American, anti-capitalist, anti-Semitic bureaucracy and a corrupt organization. It can’t even achieve its primary goal – the prevention of war. However, the UN is excellent at one thing – it does prevent war from being effective. Just ask the Israelis.

"The crisis was caused by the irrational behavior of white people with blue eyes, who before the crisis appeared to know everything and now demonstrate that they know nothing." He added, "I do not know any black or indigenous bankers so I can only say [it is wrong] that this part of mankind which is victimized more than any other should pay for the crisis."

3/28/2009

From CenterRightNews - Obama blames Bush for the deficits he has ‘inherited”. Obama says he wants to “cut the deficit in half” by the end of his second term. My liberal friends, who outnumber my conservative ones, shrug off Obama’s spending plans by citing the deficits of Presidents Reagan and Bush. Are they analogous? Well here is my response:

3/27/2009

For those on the left put aside for a moment your loathing of corporate greed (as I think you define greed, i.e. making large amounts of money in absolute terms, irrespective of performance). For those on the right put aside, for a moment, your contempt for public sector employee laziness (as I think you define laziness, i.e. jobs and raises divorced from productivity and protected by political forces).

When I look at the AIG bonus imbroglio I see a controversy where there's more to it than meets the eye, especially since the "meets the eye" portion of the story is framed by professional politicians in front of microphones and cameras. Allow me to put you inside a trader's mind. Believe it or not, they're not evil. They are however laser focused on minimizing risk and maximizing return. And they, like everyone else, want what they negotiated (which at least in some AIG cases included getting paid $1/year and a retention bonus for unwinding positions to minimizing the firm's, and thus the U.S. Government's, exposure). Post bailout they weren't asked to make AIG money, they were asked to help AIG lose less. Believe it or not, it isn't easy.

While nearly everyone else may not consider them worth the money, as a compensation matter they're really no different from professional athletes. Teachers are far more important to society than NBA players, but it's much harder to play in the NBA than become a teacher. Moreover, the NBA is designed to reward individual contribution and deliver unambiguous profit. Schools are not. Scarcity and unambiguity drive wealth toward Kobe Bryant instead of my 5th grade teacher.

In the context of trading, ethical and honest means living by the rules ex ante (altering outcomes ex post is, or should be, poison). Two of those rules are:

Make as much money as possible as risklessly as possible as quickly as possible.

If a trader has access to a "heads I win tails you lose" compensation scheme he'll capitalize like there's no tomorrow.

It's management's job to enable Rule #1's upside without exposing the firm to Rule #2's downside. From the AIG trader's perspective, he took one for the team (getting paid $1/year + a contingency payment) despite having more remunerative career choices. In sum, he did what he was asked to do and the company has the capital to consummate his contingency payment (a payment known to the relevant regulators BTW). If the company is insolvent, illiquid or in bankruptcy that's a different matter, which is a big flaw in the model, but most grownups understand this.

If management negotiated a compensation scheme that threatens the viability of the organization, that's management's fault. It's the exact same view unions, public sector and otherwise, have taken for years (if management was on both sides of the negotiating table, which was the case in AIGFPpre-bailout, that's the Board's fault). Now look at this story about the U.S. Postal Service. It's losing money like crazy. Reducing service and retiree obligations can help, but management overpromised to employees so much its survival is in doubt. Don't blame the employees or unions for this, however. Their job is to negotiate the best possible deal for themselves and management is charged with striking a tenable balance. They didn't, so now the organization is in peril.

It's easy to understand the perversity of advocating paying some dude at AIG a million bucks while cutting the hours of a $35,000/year postal clerk. But the AIG trader is harder to replace than the postal clerk and the AIG retention payments in aggregate don't threaten the long-term viability of the company, particularly since it's being wound down (the comp structure at AIGFP helped kill the company, not the absolute amount). At USPS the combined amount of retirement benefits for employees does threaten the organization's future, political protection notwithstanding.

Markets pay up for that which is desired and scarce, even if we don't like it. Calling someone lazy, stupid or greedy doesn't make any difference.

3/26/2009

Now that North Korea has put a long-range missile in place for a planned launch next month, it may be time for President Obama to rethink his plan of selling two of our NATO allies, Poland and the Czech Republic, up the river. Earlier this month, in a letter to his Russian counterpart, the President basically offered to scrap our missile defense shield in exchange for the Kremlin's help in attempting to end the Iranian nuclear program. This is a bad idea for several reasons.

First, on its face, it endangers us and our allies. An effective missile defense shield is a valuable tool in the defense of our territory and that of our allies. Should a rouge nation launch a missile or two against the US, it would be shot down and no harm would come to the homeland or our citizens. It is common sense. Why would anyone want to go out in the rain without an umbrella. Think of an Iranian or North Korean missile as the rain and the missile defense shield as the umbrella.

Second, after resisting intense Russian pressure, both Poland the the Czech Republic agreed to host integral portions of the missile defense system. As states formerly inside the Russian sphere of influence, it took immense political courage for the leaders of these nations to agree to host this American military hardware. Last year's Russian military incursion into Georgia was, in part, intended to send a signal to other former Soviet satellite states not to follow the lead of those nations that have become a part of the Western World. Although remote, Poland and the Czech Republic risk the chance of a Russian military invasion of their territory. A more likely response is the deployment of Russian nuclear missile just inside the Western Russian border, well within range of both of these countries.

As currently designed, the missile defense shield does not alter the balance of power between the United States and Russian. This system is not intended to guard against a massive Russian missile attack. It is designed to shoot down one or two rockets from a terrorist regime or a non-state actor. The Russians know and understand this.

Finally, Mr. Obama showed weakness to the Russian leadership by offering this ridiculous bargain. The unsolicited relinquishment of a key defensive system in exchange for the potential of a "promise" by the Russians to help with Iran shows that the President will exceed to Russians demands in exchange for nothing of value.

We are now faced with the two remaining members of the Axis of Evil in the process of testing ballistic missiles and a Commander-in-Chief who cannot see the value of a technology that can shoot them down. I wonder what the President will say to the families of those who die in the event of a ballistic missile attack launched by one of these two terrorist nations. During the campaign, Mr. Obama said that he would stop the development of new weapons systems. This is, evidently, one campaign promise that the President intends to keep.

Read this E.J.Dionne article and then consider whether you agree with my views:

I do not believe for even one second that revenue from new taxation will be dedicated to current spending. It will will will will will be used for new spending.

I do not believe for even one second it's a good idea to push more and more of the income tax burden onto fewer and fewer income tax payers.

I do believe a flatter (though still progressive), broader personal income tax with far fewer deductions, exemptions (save a large, and I do mean large, personal exemption) and treatments (e.g. wage vs. capital gains) would raise more revenue over time than our current system with less distortion.

I do believe a tax code employing #3 will strongly discourage tax gaming.

I do not believe for even one second either party is prepared to employ this idea because it would substantially curtail using the tax code to buy votes.

Mr. Dionne, if lower (but still progressive) rates, broader application and fewer structural arbitrages generated more revenue but constrained government's ability to engineer politically pleasing outcomes, would you support it?

If one of these people come to your door, do not turn them away. Invite them in for a nice, long chat. You won't dissuade them of their beliefs, but you'll take up time they could be spending with someone they might persuade.

3/25/2009

Daniel Hannan MEP: calls Gordon Brown "The devalued Prime Minister of a devalued Government." He goes on to proclaim, "You have run out of our money!" This was the most watched video in Britain yesterday. Hannan gives voice to conservatives around the world, who believe we are approaching a financial abyss should we follow a course of massive government debt and government takeovers of private industry. We can not spend our way out of the problems we find ourselves in. The solution to our financial crisis does not lie in the complete abrogation of our own fiscal responsibilities. When you find yourself in a hole, you do not keep digging. This post was edited this morning to correct for the wrong video being originally posted. Sorry guys.

From today's WSJ (link here for subscribers) we learn employees at a 3M plant in, wait for it, France, have taken their manager hostage to protest planned layoffs.

I'm working on a longer form post on the how the Obama administration is positioning its budget proposal (IMHO it will put the country on an irreversible path toward European Social Democracy, which of course is exactly what the left wants) as the, and the only, thing keeping this country from falling into an economic abyss (i.e. selling fear just like the left accused the prior administration of doing). But, in the meantime, enjoy the sad but funny parallel of the 3M story and the picture of downtown Paris.

3/24/2009

In a stunning political development, Benjamin Netanyahu announced today that the Labor Party will join his coalition in a national unity government. If all 13 of the Labor members of the new parliament join the government, Netanyahyu would have a clear majority with 66 of the 120 seats. Netanyahu had previously signed coalition agreements with two other parties known for their tough policies toward the Palestinians. And, Ehud Barak is expected to retain his position as defense minister.

Besides the political intrigue of Mr. Netanyahu freezing out his main rival for power (current Israeli Foreign Minister, Tzipi Livni, and her Kadima Party), the reason that this is important is that rumors have been abound in Israel for months that a Likud-Labor national unity government would signal that an Israeli military operation against Iran's nuclear program was only a short time away. Mr. Netanyahu is known for taking a hard line against Iran and its nuclear ambitions. Also, during the campaign, Labor Party leader Ehud Barak said that no Israeli Prime Minister would allow Iran to obtain nuclear weapons. Under its new government, Israel will have both a Prime Minister and a Defense Minister, from opposite sides of the political spectrum, that have both said that a nuclear armed Iran is unacceptable. If the new Netanyahu government does act against Iran's nuclear program, it will be a welcome departure from its hapless predecessor led by the corrupt and ineffective Ehud Olmert.

Earlier today, I was at a meeting of an American pro-Israel lobbying organization. During the meeting, one of the group's leaders stated the dangers of Israeli military action against Iran. His analysis focused on Iranian retaliation for an Israeli air strike against Iran's nuclear facilities.

Among the probable responses against Israel herself would be the launching of Iranian rockets and missiles with chemical and biological warheads. In addition, Iran would order Hamas and Hezbollah to launch their missiles into Israel. Some estimate the Israeli casualties of such a scenario to be upwards of 30,000.

Iran would most likely not stop at attacks on Israel proper. The Iranian response would probably include the sinking of oil tankers in the Strait of Hormuz, causing a massive disruption in the world's oil supply (some thinking that oil could reach $500 per barrel). Hezbollah terrorist cells across the world would be activated and Israeli interests and citizens would be attacked in Europe, North America and South America. Finally, and most frightening for us, Hezbollah terrorist cells would be activated in the US, Canada and Mexico with instructions to attack American civilians.

While, in my estimation, all of these horrible predictions about an Iranian response to an Israeli attack are probable, it fails to take into account an extremely important part of the equation. It presupposes that if Israel does not act and Iran acquires nuclear weapons, the result will be better. I'm not so sure that it will.

Timing is everything. In the Age of the Obamessiah, a mild manner coupled with a third world visage are about all it takes to pass off liberal clichés as received wisdom. Having been told by a liberal friend how moderate Fareed Zakaria is, I took a gander at his column in the March 23 edition of Newsweek and found a stew of reflexive Bush-bashing and Obama cheerleading, for example:

“Mainstream commentators almost unanimously agreed the Bush years had been marked by arrogance and incompetence.” Well, if that’s what mainstream commentators almost unanimously agree upon, then I guess that settles it. It’s also true that white supremacists almost unanimously agree that all Jews are scheming, clannish and rapacious.

About arrogance and incompetence, it strikes me, given the travails of the new administration, in the space of 60 days – including the several nominee vetting screw-ups; Reid/Durbin’s (with Obama’s[i] spoken support) flouting the Constitution by claiming Congress had the right to deny Roland Burris a seat; insults delivered to the British Prime Minister and President of Brazil; Hillary Clinton’s misplaced and bungled attempt at humor with the Russian Foreign Minister (and she was supposed to be the adult in the room); Obama’s default on his promise to make all legislation available to the public (with time to review) before a vote is taken, his promise to purge legislative earmarks, and his promise to purge lobbyists from administration positions; the AIG bonus fiasco; the gratuitous insult of every Caucasian citizen of the United States by the Attorney General of the United States; the rudderless Dept. of Treasury; the administration’s instigating a trade war with Mexico in the process of flouting our NAFTA obligations and paying off the Teamsters Union, by prohibiting border entry to 97 Mexican trucks (that happen to have a superior safety record to that of the U.S. carriers); the discovery (by the President) of a new financial metric, the “profits and earnings” ratio; Biden clueless regarding the “website number” of the TARP over which he had, with great fanfare, been given oversight responsibility; Obama’s inability to appear in public without a teleprompter at hand; false demurrals on signing statements; the (withdrawn) Charles Freeman appointment to head the NIC; the painfully embarrassing “Special Olympics” gaffe, the DOA trial balloon regarding moving veterans’ healthcare to private insurance plans (in a characteristically shameless contradiction of the administration’s, and let’s not forget the First Lady’s, solemn promises to “keep faith” with military families); and the incessant excuse-making and whining about George Bush, etc., etc. – if I were Fareed Zakaria, I would be a good deal more circumspect about slinging the “incompetence” arrow at Bush. Governing is a world apart from campaigning, and I would think that would have dawned on the likes of Fareed Zakaria by now and just maybe have earned George Bush a shred of retrospective respect in Fareed’s eyes – but apparently that headline is “too good to check”.

“There was hope that President Obama would abandon some of his predecessor's rigid ideological stances.” About those rigid ideological stances, this March 2008 WSJ editorial provides a convenient survey of some of George Bush’s “rigid ideological stances” – itself a liberal urban legend (while we’re at it, perhaps Fareed can explain how Obama’s rush to a several trillion dollar deficit in the service of a massive and unprecedented expansion of government comports with anyone’s definition of ideological flexibility and accommodation – please).

“He gave his first interview as president to an Arab network and spoke of the importance of respect when dealing with the Muslim world—a gesture that won him rave reviews from normally hostile Arab journalists and politicians.” Within days of the 9/11 attacks Bush traveled to a Washington D.C. mosque and publicly acknowledged Islam as a religion of peace. Bush’s close confidant, Karen Hughes, was brought out of retirement to tour Arab capitals (in a head scarf of course) to make nice to those leaders. The interview to which Fareed refers was a distasteful apology tour, by a President whose nation’s armed forces have gone to the defense of besieged Muslim populations three times in the last 18 years, deposed two tyrannical regimes, giving those oppressed peoples the opportunity to build a system of their choosing, and undertook numerous humanitarian missions. As well, among those with whom Fareed seems eager to curry favor are many who danced in the streets on 9/11. Only in the “moderate” precincts which Fareed occupies is it a given that the onus is on the U.S. to mollify each and every Arab journalist, politician and tinhorn mullah who happens to be pissed at us. (Aren’t they all?)

Fareed does not fail to trot out the most shopworn liberal jibe of all — “Ah, if we just kept in place all those Bush-era policies that were working so well.” I guess by my lights seven plus years of a successful defense of the homeland by George Bush, on the heels of seven years of neglect by Clinton[ii] culminating in the 9/11 attacks, is not a record of which I would be so quick to speak so derisively.

If Fareed chooses to spend all his time talking to people who agree with him, that’s his privilege – but, if not for those Bush-era policies that followed in the wake of those Clinton-era policies that worked out so well, chances are Fareed would be spending less time reprising liberal dogma and, with the rest of us, spending a lot more time (five times a day to be precise) bowing to Mecca.

[i] That would be the former Professor of Constitutional Law Barack Obama.[ii] Michael Scheuer, head of the CIA bin Laden unit in the mid-90’s, and a strident critic of Bush’s policies, has stated many times that Clinton failed to take advantage of any of ten opportunities to kill or capture bin Laden.

3/20/2009

It is nearly 10 am Eastern time on Friday. In the sentence below, fill in the blank with any Conservative white Republican name, past or present, and then tell me that person would not have been forced to resign and walk away from the political arena had he/she said what President B. Hussein Obama, the Comedian in Chief, uttered during his Tonight Show appearance yesterday.

While chatting with host Jay Leno, __________________ compared his lack of good form while bowling in the White House alleys to something that looks "like Special Olympics."

I am guessing that a prompt letter of resignation by BHO is not forthcoming. I would hardly even expect an apology. But if Mr. Fill In The Blank above had said it, he'd have been gone before breakfast.

Who is the next target of the Obama comedy writing team? How about the elderly? Cancer patients? Victims of Bernie Madoff? Badly deformed U.S. servicemen home from Iraq?

3/19/2009

During his two year campaign for the Presidency, President Obama insisted that he could keep America as safe as any Republican. Based on his first sixty days in office, this is obviously not true. In his short time in office, the President has:

Scheduled the closing of the terrorist detention facility at Guantanamo Bay with no plan for what comes next;

Continued to insist that we should talk to the Mullahs in Iran;

Announced that he wants to talk to "moderate" Taliban;

Allowed the imposition of Sharia law in the Swat Valley;

Announced a date certain for our withdrawal from Iraq;

Halted military tribunals for those that sane people refer to as enemy combatants;

Refused to recognize that we are engaged in a War on Terror; and

Apologized to the Arab media for our prosecution of the War on Terror.

All of these actions are evidence of the fact that the Obama Administration will be unable to keep us safe from the threat of Islamist terror. Unfortunately, as bad as all of these are, they pale in comparison to what Attorney General Eric Holder announced yesterday. The Attorney General said some detainees being held at Guantanamo Bay may end up being released in the U.S. European justice ministers met with Mr. Holder earlier this week and asked for details regarding how many Guantanamo prisoners the U.S. planned to release domestically.

Evidently, the domestic release of these terrorists is part of an agreement for allies to accept some of these detainees. After years of complaining about the Guantanamo prison for enemy combatants, our European friends have decided that they don't want dangerous Islamist terrorists released in their own back yards. So, in an effort to get the Europeans to cooperate, we have to endanger our national security by allowing these killers to roam free here on the streets of America.

Of course the leftists in Congress have been calling for the release of the Guantanamo detainees for a long time. With that in mind, I think that the perfect place for a released Islamist terrorist is Hyannis Port, Massachusetts. This is the home of Sen. Ted Kennedy. We all know that he has wanted these savages released, so why not in his back yard? I'm sure they would enjoy the Cape Cod summers. What's not to like - the boating or the lobster boils? Oh wait, lobster isn't Halal. Still, there's plenty of fresh fish for them to enjoy in order to make a culturally sensitive meal.

Of course, I don't want any of these people anywhere near where my family and I live. So it would be awfully big of Sen. Kennedy to volunteer to host these people who would like to do nothing more than to behead him for being a Catholic. If he lives to tell about it, maybe the program can spread to Pat Leahy's Vermont neighborhood. If it works there, a national roll out may be in order.

It is unfortunate for all of us that the President does not seem to understand the nature of the threat that we face. You cannot rationalize with religious zealots who's primary tenant is to convert, enslave or kill the infidel. I have chosen to take Osama Bin Ladin at his word - that he and his followers are at war with the West. Unfortunately, those in charge don't seem to believe him. I'm afraid that it will take another 9/11 type tragedy before they do.

Without joining those who seek Tim Geithner's head on pike or burning AIG CEO Ed Liddy in effigy and without arguing the legality or propriety of the so-called bonuses dispensed by the company allow me to wax a bit on the implications of expropriation risk. I understand the politics, optics and emotion. As a trader, little makes me angrier in business than a trader's failure rewarded. But as a trader, I also believe only two things separate humans from lower mammals: the sanctity of contracts and opposable thumbs.

However, now that the House has decided to tax some bonuses at some TARP recipients at 90%, we ought to consider the ripple effects. Actually, the House should have considered them before voting, but this is Congress after all where E PluribusUnum translates not as "Out of Many, One" but "Ready, Fire, Aim!"

When firms invest, among the many things they consider is the prospect of ex post confiscation by government. Want to build a cellphone tower in the Democratic Republic of the Congo? No problem, but if the investor believes, even incorrectly, there's a 50% chance the profit will be extricated without due process, the NPV calculationmust factor in this probability. If the assumption is incorrect, over time less pessimistic investors will step in and profit. Provided the less pessimistic assumption stays true, the return requirements will come down, which is good for investors, customers, employees, taxpayers and so on (of course bubbles can form if return requirements come down too much, but that's a different matter and expropriation isn't a good solution).

A simplified explanation for all non-MBA geeks (i.e., those w/MBAs are geeks, author included): Hypothetically, Mr. Cellphone won't invest in any project returning less than 10% net of tax. The tower costs $100.00 and will generate earnings for six years. Given those constraints, the project must produce $142 over those six years or Mr. Cellphone will build elsewhere. As the perception of expropriation risk goes up, up goes required return and down goes the likelihood of investing, down goes employment, down go tax receipts and so on. Rational investors with sunk costs adjust to expropriation risk, too. If Mr. Cellphone has already built his tower and the perception of expropriation risk increases, Mr. Cellphone must decide if it's worthwhile to stay in business or just bailout mid-project (please don't interpret this as a defense of supply side economics. I'm just riffing on expropriation).

Our Constitution's prohibition of ex post facto legislation is a key protection for all kinds of behavior, financial and otherwise. Weakening it, or appearing to weaken it comes at an extraordinary, but often invisible, cost. So, while we pat ourselves on the back for sticking it to AIG's scumbags, consider if investors will bother to determine that a rational Congress meted out a rational response to those who deserved it, or if Congress just makes up the rules as it goes along.

In her recent op-ed in the Guardian, noted journalist, Bethany McLean, points out that a lot of what happened leading up to the economic collapse was not the result of criminal behavior. Maybe some of the publicity hounds on Capitol Hill and in the New York AG's office should read this. While no one is excusing the results of malfeasance on Wall Street, that doesn't always mean a criminal prosecution in the proper course of action. Like Bethany says, maybe there is something strangely reassuring about Bernie Madoff?

3/17/2009

Frank commented that the S&P 500 is a poor indicator of the economy's health and over very short periods (days, weeks, months) I agree. Over years and decades it's a pretty good barometer. The graph above charts the S&P 500 against quarterly GDP (in 2000 dollars). The S&P is adjusted downward by a factor of eight, a rough guess for the effects of inflation in the past 58 years (data are through 10/1/08).

I generally loathe market commentary and can feel my eyes roll into the back of my skull when politicians do it. THEY HAVE NO CLUE AND ONLY SPEAK ON THE TOPIC WHEN IT'S SELF-SERVING. In fact, I'll make a standing offer to any politician who fancies herself the next Ben Graham or Warren Buffett: sight unseen I'll take the other side of your trade in any market at any time (absent inside information).

Other than two recent rather painfully burst bubbles, GDP and Mr. Market are heavily connected (BTW, for stat geeks, R-squared for this model is a reasonably explanatory .84). Though I've made fun of the Obama administration for the market meltdown since Election Day I think it's silly to assign all blame, or credit, to a president for daily movements in the stock market. I'd argue that our current crash is related to the massive underpricing of risk starting in the mid-1990s which did not fully unravel even after the dot.com crash. While there's a good case capital is on strike while the administration's plans for protection, regulation, taxation and unionization unfold, when businesses can start making money again Mr. Market will follow.

3/15/2009

Maxine Waters (D-CA) has been my favorite member of the House of Representative for a long time. This is not because of her politics (because, of course, she's a leftist loon). But, rather, because of the entrainment value that she gives to our great nation. Normally, this type of entertainment costs north of $100 per show in Las Vegas, but we get to watch Maxine for free.

Who can forget her act in which she accused the CIA of selling drugs in Los Angeles' black community so that the government could purposefully turn black people into drug addicts. Recently, my good friend and noted journalist, Bethany McLean, had the pleasure of appearing on Meet the Press the same Sunday as Maxine (although they were on different segments). I asked Bethany to ask Rep. Waters if now that Barack has been elected President, she believes that the CIA's drug dealing days are over. To the best of my knowledge, Maxine never answered that question.

Then, of course, there was her excellent performance on local Los Angeles television during the 1992 LA riots. Maxine had the one liners going for sure that night. She said, "If you call it a riot it sounds like it was just a bunch of crazy people who went out and did bad things for no reason. I maintain it was somewhat understandable, if not acceptable. So I call it a rebellion." No wonder ever since that day I've always felt the urge to break the front window of the local Best Buy every time my favorite sports team wins a big game. Nothing like a big screen flat panel TV to add to the enjoyment of a big victory!

Of course, Maxine isn't afraid to cover the classic hits as well. You know, the old stand by of Bush lied, people died. Bush and Cheney and their friends made millions off of the war in Iraq. Wow, falsely accusing public officials of profiting from government payments, someone like Maxine would never do that, right?

Wrong! We now find out that Maxine pressured the Treasury Department to send TARP funds to a bank in which her husband has (and she previously had) a financial interest. At the same time that Ms. Waters was browbeating the CEOs of several major banks and referring to them as "captains of the universe", she was using her political influence for personal financial gain. OneUnited Bank, a bank in which her husband is a stockholder and a member of its board of directors, received $12,000,000 in TARP funds. Also, the executives of OneUnited have donated $12,500 to Maxine's congressional campaign fund.

The Wall Street Journal reported that Rep. Water, and Congressman Barney Frank (D-MA), participated directly in pressuring the Treasury Department to give TARP funds to OneUnited. During her contacts with the Treasury about the bailout for OneUnited, Maxine seemed to have forgotten to mention her financial interests in the bank. Oh well, anyone can forget a line or two during any performance.

It wouldn't paint the complete picture if I failed to mention that OneUnited was penalized by the FDIC for excessive executive compensation. The bank was ordered to sell all bank owned cars and to cease payments on a $6,000,000 Santa Monica beachfront home purchased by the bank's CEO. Maybe that guy is a captain of the universe too?

The talk around Washington is that Maxine is in line to become the next chairman of the House Banking Committee. I can't wait for that. That will be like Maxine starring in own sitcom.

Does the new Taliban constitution come from the moderates or the hardliners? Should we say members of the Taliban that brutalize girls for reading in public to be from the "Taliban wing of the Taliban Party?"

I would love to ask President Obama for the name of a Talibani he considers moderate, just one name. Of course, that person won't be thrilled with the answer.

3/14/2009

"Our economy I think, still, the fundamentals of our economy are strong, but these are very, very difficult times," McCain said at a rally in the key battleground state of Florida. (emphasis mine)Sen. John McCainSeptember 14, 2008

"Today of all days, John McCain's stubborn insistence that the 'fundamentals of the economy are strong' shows that he is disturbingly out of touch with what's going in the lives of ordinary Americans,"Obama Campaign spokesman Bill BurtonSame Day

"If we are keeping focused on all the fundamentally sound aspects of our economy - all the outstanding companies, workers,all the innovation and dynamism in this economy - then we're going to get through this." (emphasis mine)President Barack ObamaMarch 13, 2009

3/13/2009

This link graphically represents a Google News search for the phrase "economy worst since great depression." Notice the drastic upward slope in, gee, August, September and October of 2008? Interesting.

The Obama administration has said, over and over and over again that it inherited the worst fiscal mess/economy since the Great Depression. Just Monday Budget Director Peter Orszag asked to give the stimulus package, a political and policy cornerstone of the Obama administration's approach, time to work.

The economy's a train wreck...the administration is on the case...the electorate should give the medicine some room to take effect. Fair enough. But if things are horrible, and the solution isn't working yet, how to unravel this nakedly political and self-serving statement from President Obama (emphasis mine)?

"I don't think things are ever as good as they say, or ever as bad as they say," Obama added. "Things two years ago were not as good as we thought because there were a lot of underlying weaknesses in the economy. They're not as bad as we think they are now."

Things were terrible, my fix hasn't kicked in yet and now, magically, they're not as bad as we think they are.

3/10/2009

The day after the so called "stimulus" billed passed both houses of Congress, I bet a member of the RSP staff that before April 1, a member of the Democratic Congressional leadership would call for a second "stimulus" plan. The bet wasn't for a large sum of money, but rather a sandwich at our favorite downtown deli - Perry's. Guess what, it's only March 10 and Nancy Pelosi has called for a second "stimulus" package. I win!! I will be collecting at lunch tomorrow. I can't wait to bite into that hot corned beef sandwich - mmmmm, so tasty. Wait a second, maybe I should have the pork sandwich instead...

Today President Obama gave a speech on federal education policy and put weight behind merit pay and charter schools. Other than 1) having been publicly educated and 2) having kids in public schools, I consider myself no more qualified to comment on education than anyone else with the same experience. I commend the President for challenging the dogma of his own supporters, something politicians rarely do in a serious way. President Obama deserves credit for pushing back against his own coalition.

You see, the stimulus package sold to the country in February was repeatedly advertised to save or create 4 million jobs. Today, House Dems heard from their own economists some bad news: it won't. More like up to 2.5 million jobs.

And how did Reps. Miller and Pelosi interpret that news?

Miller"It appears we were about right that this will save or create a couple of million additional jobs."

Pelosi (through spokesman)"The speaker had not changed her assessment that the stimulus will save or create 3.5 million jobs..."

To Miller, missing the target (an unprovable one no less) by 37.5% is "about right." Pelosi hears a smaller number than she prefers and just decides she doesn't like it, so sticks with the first one.

This past weekend, President Obama expressed an openness to talking to so-called “moderate” members of the Taliban. Unfortunately, the President to reach out to these “moderates” will fail. The Afghan insurgency is being run by Taliban leaders who are loyal to Mullah Mohammed Omar. Most of these leaders are on the US Military’s list of most wanted terrorists in Afghanistan. If there is such a thing as a moderate member of the Taliban, such a person is not in control of anything within the movement.

Afghan President Hamid Karzai spoke positively of Mr. Obama’s comments because he has been trying this himself. Karzai has failed to make any progress, despite his repeated offers over the past several years to engage with “moderates”.

Another Afghan analyst, Qaseem Akhgar says “’Moderate Taliban’ is like ‘Moderate killer’. Is there such a thing?” I guess a “moderate” Taliban member will only blind a woman for learning to read, as opposed to stoning her to death. Or, maybe, he’s the guy who only wants to enslave the infidels as opposed to beheading them.

The Taliban are very rigid in their demands. They have repeatedly said that they will not negotiate until their principal demand has been met. And what is that principal demand – the expulsion of all foreign troops, especially Western forces, from Afghanistan. So far, Mullah Omar has given us no reason to doubt him. When he says he won’t negotiate, I’m inclined to believe him.

Maybe the President’s decision to reach out to these “moderates” is aimed at appeasing our European allies. They seemed to be increasingly disillusioned with the conflict in Afghanistan. Of course, with the exception of the British, the Canadians and the Dutch, the rest of the NATO allies have done virtually nothing to aid our efforts in the conflict.

A repeated theme here at RSP over the past several weeks has been the projection of weakness by the current administration. With this new attempt to negotiate with zealots who desire to kill all of the infidels, the President has done it once again. As opposed to showing American strength and resolve to Islamic extremists, Mr. Obama wants to have tea with those who would slit his throat just for being a Christian.

This whole plan of talking to Mullah Omar’s disciples reminds me of another US foreign policy dilemma about 30 years ago. Back then, an American President decided to let another Muslim holy man take power. This holy man was named Ayatollah Khomeini. That US President decided that the Ayatollah could be trusted because he was a man of God. Unfortunately, this was a decision that still haunts us over thirty years later. Much to my disappointment, it appears that John McCain was right, Barack Obama was running for Jimmy Carter’s second term.

3/09/2009

A cozy little table in a quiet restaurant off the beaten path. The menu simple, refined. Wine, smooth and drinkable. A small jazz band tributes Monk. A pleasant evening during which I, the 44th President of the United States and my companion, Mullah Mohammed Omar discourse breezily on the difference between strict and moderate applications of Sharia law, in particular how a man schooled in the strict version, such as Omar himself, might publicly stone or flog a woman caught reading in public and how a moderate member of his organization might.

Omar offered to find such a member of the Taliban to answer my questions on moderate applications of Sharia law. Where are the fissures concerning Haram offenses? A thoughtful question, one worth pondering. He knew of one scholar who took a casual view toward pre-marital intercourse. The man can't answer the phone or write letters, his hands were chopped off for expressing his views. Omar would ask him personally.

Desert followed, dinner concluded, taxis to our hotels. We part not quite friends, more intellectual sparring partners. Much like professorial life in Hyde Park where this scene occurred, always enjoyably, with Friedman's disciples, though without agreement about, say, theories of wage/price inflation. A fine evening.

3/08/2009

Previously I've posted about Obama's moderate rhetoric masking a highly partisan agenda with (EXAGGERATION ALERT) a mostly slobbering media unconditionally buying every last word. But Robert Samuelson, a lonely voice of sanity at NewPravda (i.e. the publication FKA Newsweek) hits the issue dead on here: Obama intends to use as cover a deeply troubled economy to push through pent-up leftist domestic policies. He promised to do it during the campaign, 56% of voters agreed and now he's doing it.

His Democratic majority in Congress loathes deficits, except when they're in charge. His Democratic majority in Congress cherishes open debate, except when they're in charge (as always, don't kid yourself conservatives, Republicans do the same damn thing). This is how Washington works: policy in service to power (no self-respecting politician offers a policy she thinks isn't in her political self-interest). The majority seeks to expand its power and the minority uses process to frustrate power (everybody loves process when the other guy is in charge).

If I were David Axelrod I'd tell Obama now is the time to implement the irreversible entitlement portion of the Left's social democracy agenda because:

Approval ratings are high

The press is still in love

The competition is weak and rudderless

A mega-crisis creates political space for expansive federal policy

If I were David Axelrod, I'd think a confluence of those four events is extraordinarily rare. If the economy recovers Obama will have even more runway to pursue his agenda and if it doesn't, public deference will likely collapse anyway. Think of it like counting cards in Blackjack. The whole point is to bet huge when the odds are most in the player's favor. The worst that can happen is the casino kicks you out.

There is plenty wrong with the ICC, besides the ceding of national sovereignty to an unelected international body. First, once again, we have that pesky thing known as the US Constitution. Article III, Section 1 states, “The judicial power of the United States, shall be vested in one Supreme Court, and in such inferior courts as the Congress may from time to time ordain and establish.” Any participation in such an international court that subjects American citizens its jurisdiction would violate the express words of the Constitution. How could an American general, cabinet security or Commander-in-Chief acting in his official capacity be subjected to an international tribunal without the right to appeal to the US court system? It does not seem possible under Article III, Section 1.

Next, as the world’s only superpower, the United States has taken on responsibilities across the globe that other nations cannot. With our global reach, other nations will always object. Any international criminal tribunal will turn into a kangaroo court for smaller, less powerful nations (including those that sponsor terrorism) to harass American government officials and military officers.

Also, the member countries of the ICC include Chad, Jordan, Venezuela and Nigeria. It is ironic that there are member nations that have no history of the rule of law at home. Yet, somehow, this institution that is made up of dictatorial regimes is attempting to impose “justice” on the world. I do not know many Americans who would feel comfortable with the notion of Jordanian justice.

Finally, the political agenda of the so called “international community” is often at odds with the security interest of the United States and Israel. We have all seen how most of Europe has put its head in the sand in regard to the treat of Islamist terror. Anytime a nation, such as Israel or the United States, acts to protect itself from this threat, the whining of the Europeans is almost deafening. This would just afford these passivises another vehicle by which to try to stop Israel, in particular, from defending herself.

Of course, this is not to defend the likes of Sudanese President Omar al-Bashir. He should be brought to justice, but it should be done by his own people at a time when they are, hopefully, able to do so. International efforts would be better spent trying to undermine his government in favor of a democratically elected government that will not engage in mass killings and the slave trade.

The reason that the war crimes trials after World War II were appropriate was that they dealt with a specific incident and lasted for a finite period of time. The were also run by the victorious Allied Powers, all of whom had a long tradition of the rule of law. An international criminal court with no specific charge and that is made up of a bunch of despots and dictators doesn’t result in justice. It does just the opposite by handicapping free countries in their efforts to defeat those that do not respect the rule of law. Unfortunately, Benjamin Netenyahu better have his attorney’s telephone number handy.

In Mel Brooks' The ProducersSpringtime for Hitler was a Broadway musical fraudulently financed via multiple sales of 100% ownership interests in the production. Dozens of investors each thought she owned 100% of a musical producers Bialystock and Bloom believed so horrendous its failure was obvious. When, they hoped, it closed for good on opening night they'd be able to keep the unspent proceeds. Should the musical be a hit each investor would expect 100% of the profits, and you can't sell more than 100% of anything.

*Blog readers can be a little touchy, so for clarity's sake I'm not comparing Obama to Hitler. Obama's not Hitler in any way, shape, form, construct, manner or approach. His policies, politics, beliefs, ideals or preferences bear not the littlest nanocomparison to Hitler's.

Though posting often, and sarcastically, on GM no pleasure (or surprise) comes from reading this bit of news. It's a sad day for GM's employees, most of whom did not directly crater the company but were microscopically part of a vastly dysfunctional organization concerned far more about the care and feeding of labor and management than customers.

As our government contemplates yet another lifeline for the company (rest assured someone important in either the White House or Congress is doing just that) consider the futility and waste. Just yesterday the president promised to scrub the budget of $40B which of course will be found money for another pointless bailout of GM. But in a political calculus pain deferred is pain denied.

Federal cash possesses no magical power to resuscitate GM. The myth that smart people with good intentions and buckets of other people's capital can bring life to the dead undoubtedly lives.

3/04/2009

From CNN.com about President Obama's intent to scrub the federal budget for waste:

"The presidential memorandum will dramatically reform the way that we do business on contracts across the entire government," the official said, speaking on condition of anonymity. White House budget director Peter Orszag will be instructed to start working immediately with Cabinet officials and agency heads to develop tough, new guidance on contracting by the end of September, the official said. The president will say that by stopping outsourcing services that should be performed by the government, opening up the contracting process to small businesses, ending unnecessary no-bid and cost-plus contracts, and strengthening oversight to maximize transparency and accountability, we can save the American people up to $40 billion each year," the official said (emphasis mine).

Assuming this initiative saves $40B/year, let's recognize that it will be transferred to other spending, either by presidential or congressional directive. To them, $40B saved is $40B not spent. Far more importantly, though is the accountant-with-the-green-eye-shades-is-on-the-case rhetoric used by the administration to signal how serious it is about shaving 1.06% of its annual budget. This is the Obama strategy, writ small: conservative language to sell the policies of tax and tax, spend and spend, elect and elect.

Sadly, the Republican brand has lost all credibility on spending restraint, so expect more and more of this. What to do...what to do...

3/03/2009

Today my email inbox contained a letter from the office of Senator Dick Durbin, the senior Senator from Illinois. Were he not such a destructive Liberal, I could almost feel sorry for Durbin. He holds the distinction of having had as “junior” colleagues Barack Hussein Obama and, for now, Roland Burris, both of them creatures spawned in the cesspool that is Chicago politics.

Durbin’s letter is little more than a boilerplate response, written by some team of rabid interns, no doubt, to a Feb. 5, 2009, plea from me, urging him to vote against the bloated, dangerous $800 billion “Stimulus Bill”. I suggested he and Senate Democrats consider actual stimulative measures, such as cutting taxes on the two lowest tax brackets (occupied by people who actually earn income and pay taxes), exempting unemployment benefits from income taxation, reducing obscene business tax rates, keeping capital gains tax rates stable (or eliminating them altogether), and creating a small business tax deduction.

I pointed out that analysts of the bill determined that only about 12 cents of every dollar is legitimate stimulus. Here is Durbin’s reply (and, in bold parentheses, the pesky little details he either neglected to mention or misrepresented):

Dear Mr. Woodward (aka, The Conservative Soldier),

Thank you for contacting me regarding the (so-called) economic recovery package. I appreciate hearing from you (about as much as a root canal without anesthetics).

We are facing tough economic times (especially now that the Obama Administration has burdened taxpayers with debt of historic proportions). Americans across the country are feeling the squeeze of this recession as hardworking men and women lose their jobs (because we fail to offer businesses meaningful tax relief), state and local governments cut services to avoid deep deficits, and credit is cut back (after my Democrat colleagues stood by and cheered as Freddie Mac and Fannie Mae created a massive housing bubble).

The (Bogus) American Recovery and Reinvestment Act (ARRA) (P.L. 111-5) enacts a broad mix of tax cuts (actually, tax credits for people who do not pay taxes) and incentives (to not look for a job) aimed at individuals and small businesses. The act also makes investments in infrastructure (and $600 million for new cars for the Federal Government, plus $400 million to study sexually transmitted diseases), moves forward on alternative energy development, and provides tax relief to working families across the country (offset, however, when they start paying higher energy taxes under Obama’s cap-and-trade farce). These provisions are designed to help our economy on the road to recovery (that would have started by now if liberal politicians would stop using the n-word, nationalization).

Critics of the recovery bill argued that the measure does nothing to scale back foreclosure - the number one cause of the economic downturn. The Obama Administration has announced an aggressive new policy to stem foreclosures (to be paid for by Americans, like you, who pay mortgages on time every month, even if it means cutting back on plans for a third car or fourth flat-screen TV), and Congress is considering legislation to help homeowners stay in their homes (that they can’t afford now, and never will) and strengthen regulation of the mortgage market.

Some have expressed concern (as if I care) that the bill adds to the federal budget deficit. While we need to address the deficit over time (after I am dead and my grandchildren are addressing it), the first order of business is to put our economy back on track. No (obvious) earmarks were included in this bill (because we put all of them in the recent $410 billion “Appropriations Bill”).

This legislation is a necessary step toward economic recovery. Thank you again for writing to me (so I can keep my interns busy). I will keep your thoughts in mind as Congress considers legislation to address the downturn (we are fueling). Please feel free to keep in touch (but, please, I beg you, do not actually touch me, ever).

Sincerely,

Richard J. DurbinUnited States Senator (Who Was All For Roland Burris’ Appointment Until I Was Against It)

The old adage that history repeats itself was proven this week. President Obama recently sent a letter to Russian President Dmitry Medvedev. According to the New York Times, the letter contains an offer from Mr. Obama to stop deployment of our missile defense shield in exchange for help from the Russians in stopping Iran's nuclear weapons program. President Obama's overtures to the Russian President we greeted with with disdain. Mr. Medvedev said that "Haggling, however, was "not productive..."

Just like when a young American President met with Soviet General Secretary Nikita Khrushchev in Vienna in June of 1961, the current young American President is preserved as weak by his Russian counterpart. Thanks to the meeting between President Kennedy and Mr. Khrushchev, the Russians were emboldened by the weakness of the new President to the point that they deployed nuclear missiles in Cuba, well within striking distance of the US mainland.

In his six weeks in office, President Obama has showed the world weakness at every opportunity:

o He continued with his ridiculous commitment to talk to Iran;

o He gave an interview to an Arabic television network during which he basically apologises for the War on Terror;

o He announces the closing of terrorist detention facility at Guantanamo Bay without any plan for what to do with the detainees;

o He orders the release of the Islamist who was responsible for the bombing of the USS Cole and the deaths of 17 US sailors;

o He refuses to recognize the War on Terror as a War;

o He called for a moratorium on new weapons systems;

o He allowed Pakistan to install Sharia Law in the SWAT Valley; and

o He offers the Russians what amounts to a quid pro quo.

As Ronald Reagan observed, the best way to ensure peace is through strength. Mr. Obama must realize the world is filled with dangerous people who cannot be influenced by flowery rhetoric. If he continues to fail to show American strength and resolve to our enemies and allies alike, the world will, once again, not be a safe place for democracy. Peace through strength brought an end to the Cold War. As history shows us, weakness never ensures peace.

3/02/2009

3/01/2009

Last Thursday, the United States Senate voted to violate the Constitution of the United States. By passing the DC Voting Rights Act by a vote of 61-37, the Senate approved a bill that purports to give a member of the House of Representatives to the District of Columbia (along with another member for Utah). This would all be well and good if it were not for one small detail – Section 2 of Article I of the Constitution. According to this provision of the Constitution, “The House of Representatives shall be composed of Members chosen every second year by the People of the several States” (emphasis added).

There is no argument as to whether Washington, DC is a state. It is not and all members of Congress agree that it is not. Why then would the Senate feel that it should pass a bill that is in direct conflict to the express words of the supreme law of the land? That’s an excellent question to which I have no specific answer. I can only conclude that the members of the Senate feel that they are the, in fact, the supreme law of the land and, therefore, the Constitution, as a “living / breathing document”, can mean different things at different times to different people. If DC wasn’t a state on Wednesday, we can make it a state on Thursday, just because we think it should be. No muss, no fuss. Whatever we say goes!

Long ago, we the people allowed Congress to pass laws that were, to be generous, extra-constitutional. In their times, there were valid arguments as to whether the Federal Reserve Act, the Federal Employers’ Contribution Act (the act establishing Social Security) and the Medicare Act had a constitutional basis because none of these are specifically enumerated in the Constitution. However, they were not clearly prohibited by the plain language of the Constitution. As with most things regarding government, it engages in “mission creep”. Now that there are no longer objections to those things that are not specifically mentioned in the Constitution, why not go on to things that are expressly prohibited, like giving a member of the House of Representative to an entity that isn’t a state. By this logic, the Northern Mariana Islands should have a member too.

Section 8 of Article I of the Constitution grants to Congress the authority to establish a federal capital. The framers recognized the need for an independent federal capital. Following the Pennsylvania Mutiny of 1783, in which a mob of angry soldiers attacked Congress, the founding fathers realized that the federal government must be in a position to attend to its own security. It should never be in a position to have to rely on any individual state for protection.James Madison expounded on this in Federalist No. 43. Madison emphasized the need for a national capital free from the influence of any state, not only so that the federal government would ensure its own maintenance and safety, but also so that federal government would not be subject to political pressure from a state government.

Those in favor of the DC Voting Rights Act claim that the residents of Washington are being subjected to taxation without representation. Even if this mattered so as to make this act constitutional, it is, of course, not true. DC residents have the right to vote for President. Additionally, any adult resident of Washington who feels that his life would improve if he were represented by a member of the House is free to move just across the border and live in Maryland or Virginia. Each of those states sends duly authorized members to the House of Representatives. Also, Washingtonians elect a Delegate to the House of Representatives who is given a staff, can sponsor legislation, vote in committee and speak on the floor, just like any other member of the House.

In Federalist No. 43, Madison considers the issue of representation for residents of the new federal capital. He reminds us that the land for the federal district will be ceded with the consent of the state legislature from which the land will come. Madison also points out that Congress will establish a municipal legislature for local purposes derived from the suffrage of those who live in the federal district. That would be known today as the DC City Counsel, which brought us the adventures of Mayor Marion Berry.

Unfortunately, the founding fathers would no longer recognize our republic as it is today. It is time for We the People to stand up to the Senate and say that they can no longer violate the Constitution. We are a nation that lives by the words of this founding document. For our elected representatives to so cavalierly disregard it, all of our rights are in jeopardy.